History has shown time and again that a centralized socialist economy will always fail. If socialists would ever study history, they would know that and avoid the same mistakes. Then again, if socialists studied history, they wouldn’t be socialists.
Experts: ‘The price caps will promote scarcity and the black market’
The latest measures to control prices at private businesses in Cuba, announced after the salary increase for the state sector, have once again sparked debate on the Cuban Government’s economic policies.
DIARIO DE CUBA asked several economists about the the price caps , an issue that, on the one hand, has placed entrepreneurs against the wall, some already devising strategies to overcome the restrictions; and, on the other, sent authorities on the hunt for what they consider “illegalities.”
Have price caps ever worked in any economy? Would it be effective in Cuba to prevent inflation, as Miguel Díaz-Canel’s cabinet has argued? Would this affect the issue of currency unification on the Island?
These questions were answered by specialists Mauricio de Miranda Parrondo and Elías Amor, while other experts, such as Pedro Monreal, Pavel Vidal and the young Oscar Fernández, have expressed their estimations on the issue in other media and their own channels.
According to Mauricio De Miranda, “price caps are used in some very specific circumstances for certain products or services and in very specific situations, even in certain markets, the State regulates certain rates, especially in the case of public services.”
He cites the example of public transport in Colombia, which “is operated by private companies and even private taxi drivers”, but subject to “a price that the State sets and that is the same for everyone.”
However, he clarifies that “in any basic course on Economics it is taught that when price caps are placed on products whose supply is exceeded by their demand, the result is an increase in scarcity, or their sale on the black market,” a dynamic, in fact, that ” Cuba has experienced several times since 1959.”
On the question of whether the measure would be effective at tackling inflation in Cuba, De Miranda points out that “the inflation reported by Cuba’s National Bureau of Statistics and Information is not accurate, because it only refers to markets using national currency (CUP) when a large portion of basic consumer goods must be acquired using CUC, or at their equivalent prices in CUP, and there are considerable price increases.”
“Inflation is difficult to avert in any economy because, in general, there are price increases that, as Keynes said, if moderated, can be stimulants on the supply side because the producer has incentives to produce when prices rise,” he says.
The economist rules out hyperinflation in Cuba in the short term, but does believe that “inflation is not prevented by capping prices, because this is an administrative measure.”
“One could say that when prices are capped there will be no inflation, but this is because nobody can raise them. And, yes, statistically there will be no inflation, but real (although not measured) inflation will occur when products become scarce on the market, and are purchased on the black market at prices that would probably be higher than if they were sold in the free, legal market, because they factor in the additional component of the risk of punitive measures.”
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